With the 2021 Budget freshly announced, small businesses across the UK may be wondering exactly what this means for their corporation tax, SEISS eligibility, and more. We look at some of the most relevant parts of the Budget for 2021 and how they apply to small businesses in Melton Mowbray and beyond:
Continuation of the Coronavirus Job Retention Scheme
One of the most important updates to the UK’s COVID-19 schemes, the CRJS is first on our list for small businesses in 2021. With an extension of the furlough scheme to September of 2021, companies will be able to claim 80% of the salaries of employees unable to work. Applications will be processed as they were before, with a now-familiar applications process that makes it easy for small businesses to ensure employee retention.
The big change here is in employer contributions. As the economy is expected to open back up from July onwards, employers will need to contribute 10% of their employees’ salary in July, followed by 20% in August and September. This is a vital consideration for any small business currently unable to function due to COVID-19 restrictions, as you will be required to pay this additional contribution.
Fourth and fifth grants announced under the Self-Employment Income Support Scheme
For sole traders and small businesses, the extension of the SEISS to September 2021 will ensure you’re able to access the funds needed to support yourself before the economy can fully open. The fourth grant also brings in an extra 600,000 people who are eligible for the grant. As with previous grants, the fourth SEISS will cover 80% of three months’ average trading, with a cap of £7,500.
The fifth – and currently final – grant will cover the months of May-September, and eligibility for the full 80% grants will be determined based on whether turnover has fallen by over 30%. If your business does not meet these criteria, it may still be eligible for a 30% grant for the same period.
If you’re considering applying for the SEISS for the first time, it’s essential that your 2019/20 tax return is filed before the 2nd of March 2021 to be eligible. You can claim for grant number four in late April and grant number five in late July, but to apply for either, you must have your tax return completed within the specified time frame.
Changes to Corporation Tax set for 2023
While no changes to Corporation Tax are in the immediate future for businesses, in 2023, this tax will increase to 25%. However, for small businesses with trading profits below £50,000, this won’t affect your business – and you’ll still be paying the typical rate of 19%. Once your business rises above £50,000 in profits, a tapered system will increase your tax percentage up to a maximum of 25% at £250,000.
£5 billion invested in Restart Grants for businesses
One of the government’s main priorities for 2021 is the reopening of the hospitality, leisure, personal care, accommodation, and gym sectors across the UK. If your small business falls under any of these categories, you may be eligible for a Restart Grant of up to £18,000 to help your business to reopen to the public following the end of restrictions in June.
For businesses in non-essential retail, a smaller re-start grant is also on offer with up to £6,000 to enable reopening in April. Only businesses that have been required to close from January onwards due to national lockdown will be eligible to apply for a Restart Grant, and you must have been unable to provide your usual in-person service throughout that time.
VAT cut for hospitality extended until March 2022
To support the tourism and hospitality sectors, the government has chosen to retain the currently 5% reduced VAT rate through September of 2021. This rate will then be increased to a still reduced 12.5% for the following six months before the standard VAT on hospitality rate is put back in place in March of 2022.
What does this mean for small businesses?
For the average small business, not much has changed based on the decisions made for the 2021 Budget. Instead of making large policy changes, much of what the government has put in place to support companies across the UK are designed to continue providing help using the methods already in place. The extension of both the CRJS and SEISS schemes are good examples of this, providing businesses and sole traders across the UK with a way to continue to support themselves before the economy reopens.
Continued support can help ensure your business is as protected as possible during COVID-19 lockdowns and restrictions. With the help of an expert accountant, ensuring you’re getting all the help you can and accessing all the grants needed to keep your business afloat is a far easier and less stressful task.
If you’re looking for a local accountant for our Melton Mowbray business, SRB Associates are the ideal choice for you. Get in touch with our team today to find out how we can help you decipher the 2021 Budget, ensuring your business is on-track when everything re-opens again.